Tuesday, February 15, 2011

Bah! Mayor candidates sling humbug on pensions

Even as I was watching last night's mayoral debate in real time I could sense the emptiness of the answers from the candidates on the city's pension woes. The cold transcript of the opening exchange is truly dismaying:

MODERATOR CAROL MARIN: The Civic Federation today, as you know, just launched another huge red flag. Saying to all of you, that this city has a politically difficult combination of requirements. A significant new need for revenue from taxpayers as well as further benefit reductions from city workers. Mr. Emanuel, must the pensions of current city workers, going forward, be reduced in order to deal with the deficit?

RAHM EMANUEL: Carol first of all, I’ve laid out a plan to balance the budget. As it relates to the pension, you know, my uncle was former police officer who lives on that pension. Number one, if we do nothing within the decade---

MARIN: --Must we? Must we?

EMANUEL: Yes, we must make changes to preserve it. And I go to the table with the notion that we’re going to preserve it. There are two choices. Raise taxes by 90 percent. I will not do that. Let it run out of money. I will not do that. I think you have to be honest and straightforward. We have difficulties. Every city is facing this in the country. And the only way to get out of this problem is to go with the idea that you can preserve the pension. But be honest that we have the difficulty is those two choices --let it run out or raise property taxes -- are unacceptable.

MARIN: And so, Mr. Del Valle, must the pensions of city workers, going forward, be reduced, and/or their benefits?

MIGUEL DEL VALLE: I think that would be unconstitutional. I don't think it's right to reduce the benefits of employees who are contracted to work for the city of Chicago under certain conditions, and those conditions with must be honored.

MARIN: But not reaching back into their pension, but going forward.

DEL VALLE: I still feel that they were contracted under certain conditions and they should not be treated differently at this stage. We can certainly do that with new hires, but I don't think that with current employees we should be reducing their pension benefits even prospectively. It is wrong.

MARIN: Carol Moseley Braun, do you agree that something must be done for current workers going forward?

BRAUN: We can’t cut the current workers’ pensions. I agree with Miguel in that regard. And frankly I would very much like not to cut future workers’ pensions either. Because that’s an essential part of the middle class. We lose sight of what that really means. Pensions means what people retire on and live on after they can no longer work.

MARIN: You read the Civic Federation’s report? And what they say is, you can’t cut your way out of this, you can’t tax your way out of this.

BRAUN: I read every bit of it. You have to grow your way out of it. That's the issue, that’s the one link in the chain missing, in my opinion. I am glad they did the report, it’s an important report. But they didn't talk about how we grow this economy so that we can address issues like pensions and funding the other essential services.

MARIN: Mr. Chico, must we do something with current pensions in order to cut back or reduce benefits?

GERY CHICO: There’s no doubt about it, there needs to be pension reform. I’ve talked to many of the labor organizations and they are prepared to come to the table. I’ve led negotiations with collective bargaining many, many times.

MARIN: What does reform mean, exactly?

CHICO: Well, there’s any number of variables that you can adjust to bring about the sustainability of the pensions. It’s not just cutting benefits going forward. It could be cost-of-living, it could be contributions by all parties, there’s a number of things you could effect, not just the benefit level.

MARIN: Put more money into the system? Put more money into their benefits?

CHICO: Everybody may have to. There’s going to be shared sacrifice here. But I’ve talked with people about it. Here’s the big issue. There’s never been a face-to-face dialogue between the mayor and these labor organizations. We have to get in the room, sit down and work it out. And that's what I am prepared to do, and people ready for that.

DEL VALLE: I think the bigger issue is the city has failed to make its contribution to the system. Because of budgetary constraints, year after year.

MARIN: But the city doesn’t have the money to make the contribution now.

DEL VALLE: I think we’re going to have to find revenue streams to be able to make those contributions so that then we can bring the unions to the table and come up with an increase in employee contribution. But if I’m a union member I am not going to agree with that unless the city is doing its part. And that’s where we have failed.

EMANUEL: This is one of the significant points. (For the) last 20 years, the workers who agreed to that contract have held up their side of the bargain. Nine percent out of every paycheck. We got to this problem. The city hasn't made its contribution. We face a $20 billion shortfall when you take all the pensions collectively. So it’s going to require negotiating in good faith, as I said.

MARIN: Give an example of what you’d say. So you go to the table with them. You say, “Here's my No. 1 idea.”

EMANUEL: No, but here’s what Miguel said. Miguel’s point is, first of all, it’s collective bargaining. The word "collective" is key here. Talking this through. They know it. Go to firehouses... all the people know that, in fact, changes are needed to preserve it. The question is, in Florida as well as in Wisconsin, the governors there are talking about 401(k)s. The idea is, is there going to be an honest discussion, you’ve got to reject the extreme choices of letting it run out of money or raising property taxes 90 percent, which I believe you cannot do and I will not do . You’ve got to go there with the notion to preserve it, but have a discussion about the parts that make it sustainable going forward. But the notion that there aren’t going to be any changes. Actually, the workers themselves know there has to be.

CHICO: Everybody knows there have got to be changes

MARIN: Give me an example. Give them an example.

CHICO: Carol, if you look at the pension-reform commission report, there are no less than 10 to 15 ways that you can bring about the sustainability of these pensions.

MARIN: What's your favorite way?

CHICO: There's no favorite way. This is why they call it bargaining. What you do is you sit in the room --– I’ve done this many times with every organization in this city, teachers, police, fire, SEIU, trades –- you sit in the room and you have all of the your possibilities on the table. They have theirs. And you come to an affordable solution. This is not as horrible as you have portrayed. People are going to sit in a room and work this out.

DEL VALLE: What everyone is avoiding here is discussion of where the revenue is going to come from. If you’re going to have a dedicated revenue stream, and, for example, I have said that if we’re going to have a gaming license in the City of Chicago, maybe that could be the source of a dedicated revenue stream to fund the dity's share of the pension contribution. You have to identify that revenue.

MARIN: You have a hole of $600 million. How fast can you do this?

BRAUN: Can I get in here for a second? The most important thing the Civic Federation asked for was planning -- that we plan how we’re going to address these issues and we bring all the stakeholders to the table. served on the Finance Committee of the U.S. Senate and we had a special commission on pensions. A couple of things become very clear. The first is that we’re in a demographic bubble. So the problem looks worse right today than it will if you take a step back and look at it from the balcony. That's the one thing. The second thing is, Miguel is exactly right. We’ve got to grow the economy to address the pension as well as our operating budget deficit issues. Third, we do have to have better fiscal responsibility if you will in terms of how we address these issues.

MARIN: You’re got hardly any time. You have a hole in the budget that is about $600 million. And the Civic Federation I think, or Ralph Martire’s group or the Civic Committee of the Commercial Club, I think they all would stand in this room and go, “You’re not being candid about the really bad news.”

CHICO: I don't agree with that. Carol, if I might, I don't think that's fair. I think that several of us ...I've put out 29 ideas how to restructure and overhaul government. If you don't think about overhauling our government, you’re never going to get this done. This is too big a problem. A marginal, line-item change here and there is not going to get it done. The shape and size of city government is going to change. Several of the us have put out ideas that are very specific about what you would change ,whether it's running garbage, collecting money from advertising, you name it. But the business of the City of Chicago is going to change, and that’s the only way you’re going to solve this problem.

Posted at 11:01:10 AM

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EMANUEL: Yes, we must make changes to preserve it. And I go to the table with the notion that we’re going to preserve it. There are two choices. Raise taxes by 90 percent. I will not do that. Let it run out of money. I will not do that. I think you have to be honest and straightforward. We have difficulties. Every city is facing this in the country. And the only way to get out of this problem is to go with the idea that you can preserve the pension. But be honest that we have the difficulty is those two choices --let it run out or raise property taxes -- are unacceptable.

This has got to be the single best piece of Orwellian doublespeak I have ever heard from an Illinois politician.

The guy has got my vote. This is one Big Brother that cares about me! Freedom is Slavery!

The "they contracted for this pension" is a total red herring. The contract they are operating under is not a contract for life, the pension calculation most certainly can be changed, going forward, with the next contract.

The proposal I would make is a cap on the total annual pension amount from all Illinois state, county, municipal and other district sources. Cap it at $100k/ year (or $75k, or $125k, the exact number isn't too important to me) from all sources, and index that number to some measure of inflation. I don't see how any pension-participant could complain about that w/o looking bad AND it eliminates the public's complaint (whether based in reality or not)about public employees retiring with "huge" pensions. It would also eliminate the *perception* (whether real or not) that some public employees benefit from job hopping to increase their total pension draw.

Clearing up some of the complaints from the public is a necessary part of long-term health of public-employee pensions.

"This has got to be the single best piece of Orwellian doublespeak I have ever heard from an Illinois politician."

No, it's not. It appear to be a false dilemma, implying that we must choose between a bankrupt pension plan or a 90% tax increase.

But, his opening is "we must make changes to preserve it" which acknowledges that there is a middle ground, and that that is the path "we must" choose. His next stab talks again about preserving the system while making changes. It's Senatorial gobbledygook, and certainly avoids any hint of a real proposal (which, of course, is the only thing to do as a front-runner at this stage of the race), but that's neither Orwellian Newspeak nor double-talk.

Chico said essentially the same thing without the DC-ese, which is certainly better in a local race, but he has to be Avis while also staying away from a definite proposal. Del Valle, as I noted above, is bringing in a layer of nonsense and Carol is, as usual, being Carol, for good and ill.

Might I suggest to whoever wins that the negotiations be expanded to address the *entire* employment package -- financial and non-financial? That is how you come to a negotiated agreement if you really want one, rather than just a chance to look tough. Figure out what the City (or state, county, or feds since they have similar problems) can give in exchange that does not cost much money. Think it cannot be done? Ask yourself whether there is anything you would like to change about your job besides being paid more.

Chris has it right: it is a dishonest diversion to portray the union agreements as a contract for life. If the the unions want to cling to that, they might find that the way goverment will have to change the "contract" and do mass layoffs--and I mean mass--and then rehire them on terms that make sense for the actuarial realities of the 21st century. There is no longer any excuse for paying people a lifetime salary, beginning in their 50s, for not working.

Ed has it right: Rahm is the one speaking nonsense -- he wants to preserve the pensions without raising taxes. Chico at least has the guts to admit that his plan is for workers to take it on the chin, whereas Del Valle and CMB are insistent that workers not be screwed over and that the City honor its obligations. The choice for voters is between Chico and either Del Valle or CMB. Rahm, as usual is just blowing smoke up everyone's arse. And as usual, no one has the guts to point this out.

Nice made-up "quote". Is that the way you play politics at yabba HQ? Lie, lie, lie?

"Chico at least has the guts to admit that his plan is for workers to take it on the chin."

Cite, please? Certainly ain't in that exchange, wherein he says the same thing Rahm did, but in a *much* more accessible (that is, clear) manner. Which is much to Chico's credit, but, as I said, he needs to try harder than Rahm.

EZ, you didn't include a comments link in your posting of Barbara Brotman's column (very funny; I think that Ms. Brotman is one of the Trib's better writers) above, but one of the "Selected for you by our sponsor" links was "Diseases Related to Flatulence," which is appropriate today because Giuseppe Zangara, who shot Anton Cermak 78 years ago today, was supposedly afflicted by flatulence due to gallbladder adhesions.

"There is a problem I must solve. It has two solution. Both are unacceptable. Not solving the problem is also unacceptable. I will solve the problem""

Fair enough. How is that meaningfully different from Chico's "there are *at least* 10 or 15 ways to solve this problem, but I'm not going to tell you which one works, or even suggest what any of them are"?

BTW, Rahm's "letting the pension plans fail" is a boogie man that won't happen, indeed *cannot* happen, under state law, as the City will lose it's sales tax revenue to fund the pensions under the law that was just passed. So, as I said, false dilemma.

I like Del Valle's answers. It is not right to change an employee's benefit package after they've based their life and career based on what was offered. He is the only candidate that strongly took the City of Chicago to task for not keeping up with its annual pension contribution. These local governments have been skirting their contributions in order to fund things like Hired Truck and Minority Contracting schemes. Now that the stuff is about to hit the fan, these leaders are trying to take the easy way out and reduce those workers benefits. All the workers did was go to work and follow the rules as they deserved for the City of Chicago to do the same.

The pension funds could be used to build affordable housing.Use all powers at hand to make the properties more valuable such as TIFs,zoning variances,enterprise zones, etc.Drastically reducing would also greatly increase property values.Ideally this real estate portfolio would provide a return that would fund any and all pension obligations.

About "Change of Subject."

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Contributing editor Jessica Reynolds is a 2012 graduate of Loyola University Chicago and is the coordinator of the Tribune's editorial board. She can be reached at jreynolds at tribune.com.